Investing.com – The oil market had its biggest rally in nearly 30 years Monday as crude prices rocketed more than14% after Saudi Arabia’s oil facilities were attacked.
West Texas Intermediate, the U.S. benchmark blend for crude, settled at $62.9, up $8.05 or 14.8%. Since the start of Monday’s trading in Asia, WTI had reached as high as $63.47, for an intraday gain of 15%.
Brent crude, the international benchmark blend, settled at $69.02, up $8.80, or nearly 14.6%. It topped out at $64.83 earlier in the session, a 19% gain.
These were the biggest intraday gains since the 1991 Gulf War that sent crude spiking after the U.S. entered into battle with Iraq to free Kuwait from Saddam Hussein’s invasion.
"The impact and the next course of action will depend on the duration of the outage,” said Vima Jayabalan, research director at energy consultancy Wood Mackenzie.
Mackenzie added that, “Saudi Arabia has enough reserves to cover the shortfall over the next week, but if the outage extends, then filling the gap with the right type of crude quality could be a challenge. Moreover, OPEC+ output cut predominantly consists of medium and heavy sour crudes.”
Saturday’s drone-based attacks on Saudi Arabia’s main oil processing complex, Abqaiq, and the neighboring Khurais oil field halved the kingdom’s crude output by half and daily world supply by 5%.
The Wall Street Journal initially quoted unidentified Saudi officials as saying that the Saudis expect to have a third of output, or 2 million barrels per day, restored by Monday and to rebalance supply in the coming days. But Reuters cited two sources at Saudi state oil company Aramco as saying that a full return to normal production volumes "may take months."
Adding to the traders’ dilemma was how Saudi Arabia and its main ally, the United States, planned to respond to the attacks. Yemen-based Houthi rebels claimed responsibility for the raids, but U.S. officials overwhelmingly accused Iran.
President Donald Trump, who has said he’s open to holding talks with Tehran to resolve his own country’s sanctions conflict with the Islamic Republic, declined to name Iran as a suspect, though he said the U.S. was “locked and loaded” to respond.
Monday’s rally came off market highs after Trump said he had instructed the release of emergency crude supplies from the U.S. Strategic Petroleum Reserve. It is not known how much of SPR crude will be required to stabilize global supplies in the aftermath of the Saudi attacks. The affected Abqaiq processing complex and Khurais oil field in the kingdom accounted for nearly 6 million barrels per day of production.
The other thing holding the crude rally in check was the slide on Wall Street, as airline stocks tumbled on worries about pricier jet fuel, even as shares of oil companies surged.